TRAVERSE CITY, MI – Selling components toof America Mfg. Inc. requires more than the lowest price or the world’s best widget, says Larry Jutte, senior vice president-North American purchasing.
Suppliers looking forcontracts need a sustainable business model and to be good corporate citizens. And they need a clear vision as to how they – and their components – fit in Honda’s universe.
“We meet with a number of suppliers who want to show us a great new technology, or an area of their competitive strength, but too often they can’t demonstrate the value-stream connectivity, the understanding of all the interrelationships in the value stream,” the North American purchasing chief tells attendees at the Management Briefing Seminars.
“We want to see the entire story, not just a piece of it,” Jutte adds, complaining too many companies are unable to understand the key points from production to inventory and logistics that create a true value proposition.
And too many wannabe Honda suppliers simply don’t understand the goal of the entire extended enterprise is to satisfy buyers of Honda vehicles, Jutte says.
“Creating new value for the customer is a never-ending challenge,” he says explaining that great ideas developed with the help of suppliers, such as the Honda Odyssey minivan’s fold-flat rear seats and the Ridgeline pickup’s innovative in-bed storage trunk, are quickly adopted by competitors.
Despite the highly competitive nature of the automotive business, Jutte says Honda is not interested in quick fixes that don’t fit into the auto maker’s long-term goals.
“Let’s say somebody invents the best gizmo in the world,” Jutte says. “That has value.”
But if the gizmo is made by exploited workers, or by a company with shaky management, the company producing it is not getting a purchase order.
“The value of the enterprise is very important to us, and the (supplier/OEM) relationship has to be sustainable,” he says.
Even so, it doesn’t mean companies need gold-plated financials to pitch an innovative technology.
For instance, the new Acura MDX cross/utility vehicle uses electronically controlled suspension dampers made by bankruptCorp., Jutte says. The dampers use an unusual magneto-rheological fluid that varies the vehicle’s ride and handling.
“They had a unique value proposition,” Jutte says.
Another area where suppliers are being increasingly scrutinized is corporate responsibility. The auto maker now even gives annual awards to suppliers that excel in areas such as diversity, health and safety, environmental friendliness, ethics and community involvement.